Prediction Markets Have a Trust Problem. Here's How to Solve It.
In under two years, prediction markets went from a niche corner of the internet for political junkies to platforms with sportsbook-level engagement.
Kalshi and Polymarket alone have hit millions of monthly active users.
For most industries, that growth curve gets a headline and a victory lap. For anyone responsible for trust and safety, it's the exact scenario that keeps them up at night. You inherit a flood of users (and every bad actor who follows them) before your infrastructure has had time to catch up.
"These companies don't know what or how they should moderate yet," says Sam Richardson, Enterprise Account Executive at Stream who spends most weeks talking to the platforms building this category from scratch. "But they know they need to be catching everything now, before it gets out of control."
Enter: moderation.
Quite possibly the most critical element for prediction markets right now. Why? Because the alternative (no moderation, free-for-all) could mean the end of an industry.
Sounds extreme, but we wouldn't be afraid to bet on it.
Let's get into it - and why you should care.
The Blind Spot Nobody Built For
Real-money gaming and gambling apps have existed for decades, but they were never social products.
"Historically, these companies were never thinking about moderation because there was no need. There were no user-to-user interactions. You logged in, transacted, and left."
Prediction markets broke that model.
With trade chats, comment threads, and social feeds built around live events, engagement is now a feature. So what? Well, these platforms inherited millions of users and a genuinely social product, running on moderation infrastructure that was never designed to watch user-to-user behavior at all, let alone the specific kind that shows up when real money is moving on a live outcome.
Yes, it's dangerous.
What's Actually at Stake?
It's easy to forget how new this category actually is.
Kalshi and Polymarket went from effectively nothing to millions of monthly active users in about a year and a half. That's the entire lifespan of the industry so far.
"In prediction markets, you basically figure out your brand integrity in the first year and a half. After that, it's locked in. The platforms that get ahead of it now are the ones setting the standard next year."
For a builder in this space, it's a product-integrity issue, on par with getting custody or settlement wrong.
Not to mention... the whole world is watching.
If prediction market apps drop the ball on moderation, the fallout could end the app entirely, and not always at the hands of a regulator.
App stores, cloud providers, and payment processors have shown they'll pull support before any court does:
- Parler found that out in January 2021. Apple, Google, and Amazon Web Services all cut it off within days over its failure to moderate content inciting violence, and it was fully offline for more than a month.
- Omegle shut down for good in 2023 after years of lawsuits alleging its lack of moderation let predators target minors; its founder said the platform simply couldn't carry that weight anymore.
- 8chan lost its infrastructure protection in 2019 after a mass shooter posted a manifesto there unchecked, and it never came back at scale.
A category like prediction markets that's moving this much money, under this much scrutiny, won't get a longer grace period than any of those did.
Compliance & Moderation Are Not the Same Bet
If Richardson had to guess, he'd say prediction markets are going to force the entire gambling and fintech industry to admit that compliance and moderation solve two different problems, and treating them as interchangeable is a mistake that's about to get expensive.
"You can be fully licensed and still attract manipulation and abuse. Compliance asks 'are we legal.' Moderation asks 'are we safe.' Right now this category's got the first one down and is winging the second."
His prediction:
The platforms that survive the next two years of regulatory chaos will be the ones that put moderation first. Fancy lawyers aren't the solution. And frankly, they should never have to get involved if moderation is dealt with upfront.
Now What?
Stream already powers moderation for 80% of prediction markets.
And with good reason.
While most of the moderation market is still selling one-size-fits-all detection, Stream's models are built around context. They know the difference between a five-year user blowing off steam after a bad trade and a brand-new account running the exact same message pattern ten times in a row.
"Prediction markets mix finance, sports, and gambling, so people talk like it's a gambling forum. Most of that's harmless. The problem is the same language shows up right before something worse happens. Without context on who's talking and how they've changed, a moderator looking at one message will miss it."
That, on top of powerful LLM models, multilingual protection, and highly customizable rule builders, make one thing true. If you're building a prediction market platform right now, there's a real chance your biggest competitor is already using Stream.
The Bottom Line
Richardson's read on where this goes? The apps that win in this category are the ones focused on retention. And retention is downstream of whether users trust what they're walking into.
"If moderation isn't part of the picture, this isn't sustainable."
It's black and white.
The lawyers can keep you legal. They can't keep you trusted. In a category this young, with this much money and this much regulatory attention, trust will determine who's still around in two years.